MPC.

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Chapter 31.7, Problem 1QQ

To determine

MPC.

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Disposable income ________ when ________. a.decreases; taxes increase b.decreases; transfer payments increase c.increases; government expenditures decrease d.decreases; aggregate income increases

a. Suppose nominal GDP of a small economy in 2012 was $43 billion, the nominal GDP in 2018 was $96 billion, and the 2012 and 2018 consumer price indexes were 100 and 180, respectively. Therefore, between 2012 and 2018 the real GDP (in 2012 prices) increased by -- Show how you have derived your answer. b. The value of MPC in an economy is 0.76. The economy's investment expenditure (1) drops from $580 billion to $415 billion. As a result, the economy's aggregate income (Y) will change by percent. Show how you have found your answer.

b. Assume the budget deficit in a closed economy is $2b, GDP is $100b and private savings is $10b, what is Investment? c. Calculate GDP using the following information only: A flour mill produces $1000 worth of flour, of which $600 goes to a bakery (where bread is produced) and $400 to consumers. A water supplier produces $300 worth of water, of which $200 goes to the bakery and $100 to consumers. The bakery produces $1500 worth of bread and sells all of it to consumers. d. The country of Tinbutu does not trade with any other country. Its GDP is $20 billion. Its government collects $4 billion in net tax revenue. Consumption equals $15 billion, CPI equals 120, and investment equals $2 billion. What is the value of private saving in Tinbutu?